Credit Suisse Group AG (NYSE:CS) dominated headlines Monday morning amid rising concerns about the Swiss bank's financial health and new developments continued to unfold pointing to problems with the lender's business.
What Happened: According to a Bloomberg report, Credit Suisse is now looking for outside investors to raise capital for a spinoff of its advisory, dealmaking and leveraged finance units. The Swiss bank is interested in bringing in an outside investor to provide capital and help fund the costs of hiring and keeping talent, according to people familiar with the matter.
Such aligned with Credit Suisse's turnaround plans. Reports suggesting that Credit Suisse could be battling liquidity issues sent the lender's shares tumbling Monday morning. The bank's credit default swaps, which provide investors with protection against financial risks and essentially measure how a company's financial health is perceived by the market, soared to record levels.
The Swiss bank recently said it was in the process of a strategy review that included potential divestitures and asset sales.
The strategic review aims to ultimately strengthen Credit Suisse's wealth management franchise and transform the investment bank into a capital-light, advisory-led banking business with an increased focus on markets.
Credit Suisse also said it was evaluating strategic options for its securitized products business, which included attracting third-party capital and reducing the firm's absolute cost basis.
Credit Suisse's lending businesses had even reversed some share lending transactions in recent days. Credit Suisse reportedly made borrowing clients aware some counterparties had temporarily suspended deals with the bank because of "mounting market pressure," which forced it to withdraw available shares.
Related Link: Credit Suisse Lending Clients Spooked By Swiss Bank Financial Health Concerns
Why It Matters: Credit Suisse had faced questions over its risk management practices in the past, as well as been plagued by a string of scandals and most notably took a $5.5 billion hit following the collapse of U.S. investment firm Archegos Capital.
In the company's most recent quarter, Credit Suisse reported a net loss of approximately $1.6 billion, which was down from earnings of more than $250 million year-over-year, according to Benzinga Pro.
Credit Suisse is scheduled to announce its third-quarter financial results on Oct. 27. The bank said it will provide further updates on its strategic review in connection with its quarterly results.
CS Price Action: Credit Suisse has a 52-week high of $11.04 and a 52-week low of $3.70.
The stock was up 1.78% at $4.30 at time of publication Thursday, according to Benzinga Pro.
Photo: Thomas8047 from Flickr.
